By Darrell Martin
The Australian Trade Balance is due out Wednesday, September 7, at 9:30 PM ET. This can make for a news trade using an Iron Condor strategy with Nadex AUD/USD spreads. The trade balance is the difference between imported and exported goods and services. The numbers are released monthly. Since Australia’s working hours are the US evening hours, it makes for a good evening news trade.
The trade can be entered as early as 6:00 PM ET for 11:00 PM ET expirations. For the setup of this strategy to trade this news, one buys a spread below the market with the ceiling where the market is trading at the time and sells a spread above the market with the floor where the market is trading at the time. The trade should have a profit potential of $30 combined between the spreads.
When entering this trade, the full amount of risk is paid upfront, which effectively caps the risk. In addition, after entering stops, risk becomes more managed. The market tends to make a move and pull back in response to this event. This is an ideal reaction for an Iron Condor. Max profit is when, at settlement, the market is right between the two spreads, after having pulled back from any market movement. Stops should therefore, be entered where the market would hit 60 pips above and below from where it was at entry, keeping the risk to a 1:1 realistic risk reward ratio.
Break even points for this trade would be 30 pips above and 30 pips below from where the market started. Should the market be anywhere in between those points at settlement, the trade will make some amount of profit.
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